In his words,

“The vast majority of scientists who conduct climatological research and publish their results in professional journals say humans are the cause of global warming. There is essentially no controversy among actual climate scientists about this.“

In other words,

“Nothing to see here folks; keep moving.”

Despite himself being a lapsed astronomer (No, NOT astrologer!), he derides those “deniers” that lack credentials as climate scientists. In the business of promoting AGW, deniers are ideologues that should not be confused with legitimate scientific skeptics.

But the lack of such credentials did not undermine an earlier assertion of another non-climate scientist pointing to a consensus based on work published in peer-reviewed academic journals. (See, Naomi Oreskes, also NOT a climate scientist!)

The poll in question has the interesting title, The Consensus Project, and the reported results were, amazingly, that a consensus did indeed exist. Imagine that!?!

Indeed, the consensus that global warming is here to stay & is our fault that is so strong that the promoters of the idea felt it necessary to set up the (drum roll, please): The Climate Science Rapid Response Team (CSRRT) to “connect climate scientists with lawmakers & the media”.

Despite having a slam-dunk case for their views, the AGW-people felt a need to hand-feed politicians, bureaucrats & media personalities with the “correct” view on AGW. )A search of the CSRRT web site did not reveal a source of funding to keep up their endeavors.)

And that was: “The dollar, as good as gold!”

It should easy to see why this is no longer the case.

First, a bit of history. Consider that gold content of the US$ was set at $20.67 per ounce in 1832 & was not altered until 1933. As such, there was basically no domestic inflation in the USA for about 100 years & the gold value of the $ in international commerce changed very little except during wartime.

For his part, FDR anticipated Rahm Emmanuel’s mantra to “never let a good crisis go to waste” & issued an executive order forcing all Americans to give up their gold. The fact that this was an egregious violation of one of the most sacred beliefs of the American Republic: the primacy of private ownership.

Overlooking the dangerous precedent of his outrageous action, scholars of that period have perpetuated a conventional wisdom that most of FDRs policies were both necessary & efficacious.

For the next 40 years, foreign governments could redeem $’s for gold. But in August 1971, President Nixon defaulted on America’s promise to exchange gold for $.

Fast forward to the present where near-zero interest rates, massive monetary pumping & the explosion of public-sector debts have all contributed to undermining the myth of the “Almighty Dollar”.

In the not-so-distant future, the price of gold will breach $2000 per ounce.

This will be a testimony to political dishonesty, populist irresponsibility & intellectual failures of most economists to understand the nature of a world with a perfectly elastic supply of paper (fiat) money.

Now that 15,000 has been breached, it might be useful to see how out-of-kilter Wall Street when looking at what is happening on Main Street, America.

Regular Gas Price: Then $2.75; Now $3.73

GDP Growth: Then +2.5%; Now +1.6%

Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million

Americans On Food Stamps: Then 26.9 million; Now 47.69 million

Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion

US Debt as a Percentage of GDP: Then ~38%; Now 74.2%

US Deficit (LTM): Then $97 billion; Now $975.6 billion

Total US Federal Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion

US Household Debt: Then $13.5 trillion; Now 12.87 trillion

Labor Force Particpation Rate: Then 65.8%; Now 63.6%

Consumer Confidence: Then 99.5; Now 69.6

S&P Rating of the US: Then AAA; Now AA+

VIX: Then 17.5%; Now 14%

10 Year Treasury Yield: Then 4.64%; Now 1.89%

USDJPY: Then 117; Now 100

EURUSD: Then 1.4145; Now 1.3050

Gold: Then $748; Now $1583

NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares

It is more evidence that current editors & writers for this publication are as out of touch with reality as they are bereft of knowledge of basic microeconomics.

What is happening is that years of central bankers engaging in a form of central planning have fixed interest rates at almost zero. In turn, this has had the same distorting effects in financial markets as does price fixing in goods markets.

But much worse is that the mis-pricing of risk has undermined the real sector of the economy causing deindustrialization as funds are diverted into financial assets. Banks are de-incentivized to lend to manufacturing or industrial ventures since they can make mountains of money simply holding or trading sovereign debt that involves much less risk & is much less costly.

The “financialization” of the US economy explains in large part why unemployment rates in the US remain stubbornly high & GDP growth rates remain low. Yet all this is being done in the name of “stimulating” economic recovery or tampering with targeted sectors.

Does no one notice that forcing down mortgage rates is likely to pump air into yet another real estate bubble, just as the excess liquidity is inflating stock market indices.

In all events, this is an old story whereby negative “real” interest rates induce lending that is non-economic inasmuch as it will not & cannot be supported by existing production levels or productivity growth.

It is not merely economic ignorance that is at play. It is that too many “learned economists” are backing the wrong horse. Support for economic “stimulus” is based on a repackaged argument that involves using monetary policy to create-something-out-of-nothing.

History provides voluminous evidence that the advice of inflationists (remember John Law?) leads to extensive economic grief.

Beware! (But feel free to make hay while the sun shines since much money can be made playing the markets.)

It seems that sensationalized media coverage of horrifying yet infrequent mass murders with guns has blurred certain realities.

Despite media bias in favor of gun controls, official US government data indicate that crimes committed with guns (including killings, assaults, robberies, etc.) have dropped sharply in the US after peaking in the mid-1990s.

A report from the US Bureau of Justice Statistics indicates that non-fatal gun crimes fell by 69% & the gun murder rate decreased 39% between 1993 & 2011. (While overall violence has dropped in the US, it does have a higher murder rate than most developed countries.)

Even so, a survey conducted by the Pew Research Center indicates that most Americans are unaware of the decline & more than 1/2 believe that gun crimes are have risen. The Pew survey indicates that only 12% of Americans surveyed thought that gun crime had declined over the past 2 decades while 26% thought it remained the same & 56% thought it had increased.

Just as a few hot summers helped shape (false?) expectations of rising average global temperatures (aka, global warming or climate change), it appears wall-to-wall media coverage of the horrors of a few mass murders support misleading impressions about violence in the USA.

As for the latter:
“…many of Summers’s papers explored the reasons markets aren’t always perfectly efficient.”

So, anyone that really believes there is academic merit in trying to prove ANYTHING is not “always perfectly efficient”; raise your hands!!! It is symptomatic of a so-called intellectual to be surprised when the real world does NOT comport with their models.

In all events, such a benchmark clearly tends to lead to criticizing markets for failing to do the impossible & also invites foolish suggestions about how politicians & bureaucrats can make them better!

Among Larry’s doltish remarks:

“But this needs to be done in a balanced way. The highest priority is getting the economy growing.” Summers said that he expected the government debt to grow, because the cost of services that the government pays for — like education and health care — are rising far faster than many of those bought in the private sector.

(I remember choking when then-Senator Phil Gramm replied in his inimitable Southern drawl to a query about Summers’ confirmation hearing: “…he is real smoart goay”!?!)

First, it is true that there are ways to get the economy to grow. The question is whether the policies that Summers prescribes actually help or hinder! Look to Japan for a hint. Despite nearly 2 decades of continual deficits, zero-interest rates & massive injections of liquidity, Japan’s economy remains moribund.

Instead of declaring defeat, the case of Japan has been a source of delusional denial of the failure of “stimulus” policies!

Second, it does not seem occur to him that costs of services (health & education) are rising BECAUSE governments provide them!?! And that cost-containment is something that most governments at all levels have a terrible track record.

If there is truth in the expression that “insanity involves doing the same thing over & over while expecting different results”, perhaps Keynesian practitioners might rightly be consigned to an asylum…?

But consumer spending accounted for nearly 90% of the GDP growth over the first 3 months of 2013 with business spending on plant & machinery adding only 2.1%. Since business spending is a strong predictor of future hiring and wage increases, this is bad news for workers.

It turns out that consumption can never be the basis of sustainable economic growth since prosperity is based on the production of more goods rather than on consumption, per se. What is going on is that all this new consumption is enabled by monetary pumping from the FEDs “unconventional” monetary policies.

And monetary inflation has also provided excess liquidity that has been driven into assets that boost the net worth of the super-rich, thereby exacerbating inequalities in income and wealth. Those that anguish so much about disparities in income or wealth must understand that the blame falls squarely on central bankers rather than the market.

The US economy supposedly left its recessionary bottom in June 2009. Over the 15 quarters since, annualized GDP growth rate has averaged 2.1%, less than half the 4.4% average rate of the past nine recoveries.

With the current expansion generating subpar growth rates, unemployment remains high and real median household income is about $3,000 less than the end of the recession.

These dismal results are registered despite the best efforts of policy makers to “inflate” the US economy. Their response…?

More of the same!!!

And so, the federal government continues to run massive fiscal deficits that adds inexorably to public-sector debt. Of course, all this is facilitated & encouraged by the FED holding interest rates close to zero as well as acting as “buyer of first resort” of Treasuries.

Unfortunately, the basis of this ill-fated logic is the belief that consumption is the main driver of economic growth; this myth guides the manner in which GDP is measured & reported.

In searching the article for a germ of wisdom or grain of truth, I had to take one comment out of context to grant him this possibility:

“…governments are vastly abusing their power to print money”

Alas, he insists that this is not the case despite steady erosion of purchasing power of most currency units & an ongoing currency war.

Consider another comment:

“…paper currencies have value because they’re backed by the power of the state, which defines them as legal tender and accepts them as payment for taxes”

But this is exactly backwards! Paper currencies back up the power of the state & are supported by “legal tender” laws (without which they might be refused).

As for Bitcoin, he first tries to discredit the whole project by suggesting that they are widely used for illicit payments for dubious activities. There is no attempt to say what proportions of Bitcoin transactions are conducted as such. If there is a moral point, then paper currencies should be discredited on these grounds since most of all illicit transactions for dubious activities involve the use of dollars or euros.

But Mister Krugman never lets facts get into the way of a good story.

To deflect complaints against paper currencies as fiat money, Krugman declares that the value of Bitcoins are just like that of any (fiat) paper currency & that the “belief that other people will accept them as payment”.

And to placate those that might consider that actions by central bankers might have put us all onto thin ice, Krugman assures his readers:

“Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis”

Well, to paraphrase Milton Friedman, “nothing is so permanent as a ‘temporary’ government program”.

The permanence of monetary misbehavior of central bankers should be painfully in this case. As it is, not one central bankers has even tried to present an “exit plan” whereby they end their mad monetary experiments.

indeed, they cannot offer an exit plan since that involves raising interest rates that would both curb the capacities of governments to issue debt, halt banks ability to make obscene profits & out-sized bonuses.

But higher interest rates would displease the 2 primary beneficiaries of artificially-cheap credit & monetary pumping, bankers & governments.

As such, central bankers cannot imagine taking the step to let interest rates rise. At least, not voluntarily. They will do so only in the face of imminent collapse (or, more likely, just after).

And then he offers the assurance that only good can come of all the monetary pumping. (Apparently, Krugman cannot imagine any downside to it all…?)

“Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated”

But this is symptomatic of the misguided concern over the eventual impact of current monetary policy on price indices. It turns out that the big problem is the distorted production structure that is destroying wealth as we speak, but that will only become evident when “the tide goes out”.

Any future economic collapse will not be due to rising consumer prices. The real danger is from collapsing business models that were allowed to emerge & depend upon artificially-cheap credit to survive.

Funny thing is, even Krugman would oppose central planning & fixing price of an important commodity like steel or oil or food or almost anything else. But somehow when it comes to MONETARY central planning whereby interest rates are fixed, arguably the most important single price in any modern economy; HEY! no problem!!!

Well, there is one other statement that contains a great deal of truth, but Krugman does not really grasp the import of what he cites:

“Money is, as Paul Samuelson once declared, a “social contrivance,” not something that stands outside society”

This is a stronger claim that either Krugman or Samuelson understand. Money, like language, evolved out of human actions as ways to solve complex social interactions.

As such, no government officials invented them or declared them necessary. Therefore, interference by experts or elites (as with Academie Francaise or central bankers) will undermine the social value that emerged out of mutual, voluntary consent. The French language is probably less robust due to external controls over its spontaneous development & paper currencies constantly lose purchasing power due to political decisions (despite the supposed “independence” of central banks).

In all events, a “legal tender” law is hardly a “social contrivance” if we take to refer to an outcome of mutual & voluntary agreements. Instead, legal tender laws involve are based on the force & power of government authorities.

And in conclusion, Krugman asks about Bitcoin:

“do we need a new form of money? I guess you could make that case if the money we actually have were misbehaving. But it isn’t. We have huge economic problems, but green pieces of paper are doing fine — and we should let them alone”

Doing just fine!?! This comment is right out of the mouth of Alfred E. Neuman in Mad Magazine: “What! Me Worry?”

Apparently, Krugman sees no problems since he is blinded by his religious devotion to the Keynesian church.

He also assurances that if the BOJs unconventional monetary pumping (aka, quantitative easing or QE) showed signs of triggering asset bubbles, that steps would be taken to avert them.

It is a tribute to the naivete of journalists reporting on this that no one bothered to ask Kuroda how successful BOJ has been in detecting and seeing off bubbles in past!

Or any other central bank for that matter!

As it is, central banks tend to limit their attention to measuring the effect of monetary policy on price indices as the primary, if not sole, indicator of the efficacy of their efforts. As such, they have a dismal track record of detecting bubbles, as is the case with most mainstream macroeconomic analysts.

Meanwhile, it is unlikely that the BOJ is able to detect how much of the new liquidity will be bled off into foreign markets through the carry-trade, thereby sparking asset or commodity bubbles elsewhere.

In turn, some economists believe that the addition of more than a trillion dollars in additional home value will spur a “wealth effect” to get consumers spending again.

Hey, this has gotta be good news.

But then, didn’t the NBER announce that the recovery officially began in June 2009. (Hmmm, it seems some people in the real world did not get that memo.)

Ok, let’s see if any of this makes sense. Consider that real incomes of American workers were nearly stagnant, rising by about 2% over past year & barely offsetting price inflation.

So, how could & why did home prices rise?

The simplest answer is found in monetary pumping, aka, quantitative easing (QE).

With mortgage rates on new & existing homes down by up to 1% compared to last year, monthly financing costs for new homes remained same & went up by 3% for existing homes.

And so the housing “recovery” has been conjured up with historically-low interest rates, guarantees on almost 90% of all new mortgage debt with 1/2 half of all home purchase made with no equity at closing. Meanwhile, the Fed is buying $40B in mortgage-backed securities each month (plus another $5B in Treasuries).

Anyone that thinks this sounds just like the last monetary & government policy housing boom/bubble; raise your hand!

And now remember that average mortgage rate during early 2000s were just over 6% while they now average less than 3.5%.

If mortgage rates were to go back to 6%, the US housing market cannot remain buoyant unless incomes rise by 1/3 or house prices fall by 25% or lending standards become even more lax.

Something tells me this cannot end well….